Why stocks outperform real estate and gold long-term

[UNITED STATES] Some Americans believe real estate and gold are the best long-term investments, but financial experts caution that this view may be misguided. According to a recent Gallup report, 37% of U.S. adults consider real estate the top choice for long-term investment. This figure is nearly unchanged from last year’s 36%. Gold ranks second, with 23% of respondents favoring it, marking a 5-point increase from the previous year.

The rising popularity of gold could be linked to ongoing economic uncertainty, including inflation concerns and geopolitical instability. Gold has long been regarded as a "safe haven" asset during times of turmoil, which may explain its renewed appeal among investors seeking a reliable store of value.

In contrast, only 16% of Americans believe stocks or mutual funds are the best long-term investment—a decline of six percentage points from last year’s report, according to Gallup. The firm surveyed 1,006 adults in early April.

Financial advisors warn that this growing preference for real estate and gold may be driven more by trends than solid financial reasoning. "Don’t get swept up in the hype," advises Lee Baker, a certified financial planner and founder of Claris Financial Advisors in Atlanta. Carolyn McClanahan, a CFP and founder of Life Planning Partners in Jacksonville, Florida, adds, "People are always chasing what’s hot, and that’s the worst thing you could do."

Here’s what investors should consider when it comes to gold and real estate, and how to incorporate them into a diversified portfolio.

The Allure of Gold and Real Estate

Baker understands why gold and real estate are so appealing: Both are tangible assets, unlike stocks. "When you buy a house, you can see it, feel it, touch it. Your stock investment may not feel as real," he notes.

However, the emotional appeal of these assets can sometimes cloud judgment. Real estate, for example, often carries hidden costs such as maintenance, property taxes, and market fluctuations that can erode returns. Gold, on the other hand, doesn’t produce income through dividends or rent, making it a speculative investment based solely on price appreciation.

Despite the surge in gold’s popularity this year, its share among Gallup respondents remains well below its peak of 34% in 2011, when gold was a refuge during high unemployment, a struggling housing market, and volatile stock markets.

Gold prices have been climbing this spring, with spot gold reaching an all-time high of over $3,500 per ounce in late April. Just a year ago, prices were around $2,200 to $2,300 per ounce.

Real estate has also garnered more attention in recent years due to strong demand from buyers and rising prices. The median sale price of an existing home in the U.S. in March was $403,700, according to Bankrate, down from a record high of $426,900 in June.

Why Stocks Are the Better Investment

Although both real estate and gold can appreciate over time, experts say the stock market tends to provide higher returns. The S&P 500's annualized total return was 10.29% over the 30 years ending in April, according to Morningstar Direct data. Over the same period, real estate’s annualized return was 8.78%, while gold’s was 7.38%.

Stocks are also more accessible to the average investor. Unlike real estate, which typically requires a significant down payment, stocks can be purchased in smaller amounts through fractional shares or low-cost index funds, making them a more inclusive investment option.

McClanahan highlights another advantage of stocks: diversification. "When you invest in stocks, you’re not putting all your money into one asset. You’re spreading it across thousands of companies that do different things," she explains.

Additionally, while real estate and gold may feel more tangible, they can be harder to sell quickly, making them less liquid investments.

How to Incorporate Gold and Real Estate Into Your Portfolio

For those who want exposure to real estate or gold, financial advisors suggest several strategies to do so wisely.

For real estate, one option is to invest in real estate investment trusts (REITs) or exchange-traded funds (ETFs) that bundle real estate stocks. A REIT is a publicly traded company that owns and manages income-producing real estate, such as apartments or office buildings.

REITs also offer the advantage of mandatory dividend payouts—they must distribute at least 90% of taxable income to shareholders, making them an attractive option for income-focused investors, such as retirees. You can buy shares of publicly traded REITs or REIT mutual funds and ETFs much like stocks.

Real estate mutual funds and ETFs offer even greater diversification by investing in multiple REITs and a broad range of real estate assets, reducing the concentration risk of owning a single property.

For those interested in gold, experts recommend investing through gold ETFs rather than purchasing physical gold. This approach allows investors to capture the price movement of gold without dealing with storage, theft risks, or insurance concerns.

"As with ETFs, you get the value of gold’s return, but you don’t actually own the physical gold," McClanahan says.